JOHANNESBURG - Redefine Properties has agreed to sell a 19.5percent stake it owns in Australian Securities Exchange-listed Cromwell Property Group for R3.7billion to Singapore-based ARA Asset Management.
The transaction has bolstered its liquidity and signalled the start of a process to refine its offshore structure.
Redefine chief executive Andrew Konig said yesterday that the Cromwell sale was “investor positive from a number of respects, most notably from a liquidity point of view, and is balance-sheet positive on the loan-to-value front”.
The net asset value of Redefine’s total investment in Cromwell was R4.89bn at the end of August.
Redefine will, however, retain 60million Cromwell securities, representing 3.09percent of total exposure in issue, with a current market value of R556.3million.
Konig said this provided Redefine with an opportunity to benefit from future pipeline deals in Australia. Redefine received dividends of R380.1m from its investment in Cromwell in the year to August.
Konig said Redefine would sell most of its remaining shareholding in Cromwell.
“For us, it’s about optimising capital efficiency while still benefiting from future distributions and the redevelopment of certain quality assets in Australia,” he said. This included the completion of Northpoint, which was in the process of being redeveloped. It is expected that Northpoint will be completed in the first half of this year.
Konig said the transaction formed part of the process of refining Redefine’s international holdings in various investments. It has grown its offshore footprint significantly over the past six years.
One of those investments was its 23percent stake in Cromwell. But Redefine also invested R5bn in Echo Polska Properties in Poland in 2016, and, more recently, acquired a strategic 25percent stake in a e692m retail portfolio of 28 property assets across Poland to further diversify its rand hedge earnings.
Konig said Redefine’s broader strategy remained to grow its local portfolio while targeting a diversified stream of revenue in offshore jurisdictions with growth potential.
“This deal ticks a number of boxes for Redefine, which supports our mission to create sustained stakeholder value.
“We create capital efficiency, refine our international holdings, reduce debt, and have a lot of funding capacity should another investment opportunity arise,” he said.
Konig said when operating in a constrained and costly capital environment, recycling of capital had become a prominent feature of Redefine’s funding strategy to efficiently source capital and improve credit metrics.
“To sustain value creation for all stakeholders, Redefine seeks to optimise its allocation of capital through active asset management. The sale of the majority holding in Cromwell significantly advances these strategic objectives,” he said.
The transaction is still subject to approval by the Foreign Investment Review Board.
Redefine shares rose 0.86percent on the JSE yesterday to close at R11.70.